Self Directed IRA for Business
The other option with a self-directed IRA is to start or purchase a new business. A new business might need cash to invest into equipment, franchise fee, marketing, operational cash, etc.
If you want to expand your horizons into real estate notes, equipment leasing, livestock, private debt and equity placements, and oil and gas you can also use a self-directed IRA. Be careful here. Suitability might be your biggest hurdle, but unfortunately we are all humans and can pretty much talk ourselves into anything. Talk to your financial team before squandering your life savings on ocean front property in Arizona.
And a self directed 401k may be used as well. A 401k differs slightly from an IRA since it tied to your business. So you get the high contribution limits and no income phase outs of a 401k, and the ability to act as fund manager and purchase assets directly for the benefit of the 401k. This is complicated and requires extensive trust work, but not impossible.
Another option is a self directed IRA LLC where you have what is called “checkbook” control. This allows you to take your IRA, fund an LLC with the IRA as the owner, and you direct the LLC to make investments. There are some major pitfalls with this approach such as unrelated business taxable income and unrelated debt financing income not to mention the huge possibility of prohibited transactions.
The Employee Retirement Income Security Act (ERISA) has made strides in how self directed IRAs are to be implemented, but the IRS which has jurisdiction over IRAs in general and the Department of Labor which has jurisdiction over prohibited transactions have been slow to adopt new policies. In the past IRAs were mainly institutional and in some cases self-governed. In other words, it was easier to have oversight with 100 IRA providers rather than 10,000 self-directed IRA providers.
See the link below for the all kinds of problems associated with LLCs and self-directed IRAs-
